Sales taxes are ad valorem taxes. Sales taxes are a percentage of the retail price of the product sold. At a store with higher prices, you pay more in taxes for the same product, because the price is higher. Both kinds of taxes would apply to some goods in most parts of the U.S.
The analysis of a per unit or an ad valorem tax are very similar but we focus on per unit excise taxes in this section as the simplest of these taxes. The insights gained here apply perfectly well to most kinds of taxes.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved